Mellon Financial Corp. has placed a bet on what some say will be the next big thing in business process outsourcing: the management of corporate customers' outlays.
The Pittsburgh company, already a bank leader in cash management, announced Tuesday that it would buy the privately held SourceNet Solutions Inc. of College Station, Tex., a specialist in so-called accounts-payable outsourcing.
Such companies not only pay corporate clients' monthly bills but also manage them, matching invoices against purchase orders to find discrepancies or capture early-payment discounts.
Buying SourceNet will give Mellon a leadership position in the specialty, said Robert W. Stasik, an executive vice president who leads Mellon Global Cash Management, a treasury services unit. To his knowledge no bank now offers such a services, he said.
(Other providers include Affiliated Computer Services Inc. of Dallas and Electronic Data Systems Corp. of Plano, Tex., as well as Accenture Ltd. and Deloitte Touche Tohmatsu, according to Everest Group, a Dallas outsourcing consultant.)
SourceNet's services parallel those that Mellon now provides on the accounts-receivable side through its lockbox services, Mr. Stasik said Wednesday. Those include the processing of payments to corporate clients and updating their records.
The deal is "an attempt, really, to get into the client's back office," Mr. Stasik said.
SourceNet, established in 1996, has 225 employees, who are expected to remain in College Station. Vincent L. Burkett, a founder of the company and its president and chief executive, will continue to lead the operation. The sale is expected to close by yearend; the price has not been disclosed.
Corporate customers have become more aggressive about managing their funds, and are increasingly looking to banks to provide them with tools to do so. Technology has also played a key role in this trend, with vendors and outsourcing providers offering new applications that allow them to monitor their bank accounts, often in real-time, in order to maximize the returns on their balances.
What the banks have been missing, however, has been services to help their corporate customers improve their account receivable departments.
To date most business-process outsourcing has been of human resources functions, from the fairly straightforward payroll processing, including tax payment and reporting, to management of employee benefits such as health insurance and retirement accounts.
But the Sarbanes-Oxley Act and other laws have spotlighted corporate finance issues, prompting companies to seek controls on payables "as sophisticated as what we have on the receivables side," Mr. Burkett said.
In the past decade many companies have set up "shared services" centers to manage the common financial needs of diverse business lines, Mr. Burkett noted. That centralization led to the development of outside providers of accounts-payable services, whose focus saves money for their clients, he said.
Edward Neumann, the managing director of consulting at Javelin Strategy and Research of Pleasanton, Calif., said the SourceNet deal is "a relatively bold move" for Mellon, which has been a cash management leader for a decade or so.
Until now, banks' have gone no further in accounts-payable outsourcing than reselling such services as the management of payrolls and of preauthorized debits for monthly invoices, such as utility bills, Mr. Neumann said.
